February 5, 2013, by Rob

“That’s the way we do things round here”

Thoughts on Business Ethics and Corporate Culture 


‘Post- 9/11’, ‘post-Katrina’ and ‘post-Enron’. In a world defined by the passing of major catastrophes, there is an underlying optimism that such profoundly unsettling events also mark the beginning of something better, less horrific and morally progressive. Each new ‘post-’ seemingly galvanizes a collective urge for a better moral compass to guide the actions of governments, business, consumers and society away from future human-contrived disasters. Yet in the passage time, the evils of war, terrorism, hurricanes and corporate irresponsibility, rather than disappear, merely seem to fall on new shores. For the business community in particular, the Enron Scandal was its own moral signposting, symbolizing all that is wrong with aggressively self-interested, profiteering and a morally devoid business mindset. The last decade then should have been a time for all to reflect, to learn, to draw a line in the sand and move on into the ‘post-Enron’ era; defined by an invigorated moral hunger within the business community and greater ethical benchmarking for business-society relations. Alas, like many other ‘post-‘ epochs it seems not (yet?) to have transpired.

If anything, the last decade has been defined by cyclical occurrence of high-profile ethics scandals that implicate not only the usual suspects –‘dirty’ extraction/energy industries- but the once trusted banks and even beloved, ‘squeaky-clean’ national institutions such as the BBC (e.g. Jimmy Savile). It is hard to point to a common cause (or remedy) for these major ethical transgressions, especially given the very distinct nature of their business and governance models, stakeholder relations as well as their respective professional and industry dynamics. However, one recurring claim is that a certain organisational culture conspired to create a context in which doing wrong is ok, even good business or, perhaps most commonly, is acceptable, so long as we all do it and no one finds out. Paradoxically then, organisational culture, lauded by business schools, governments and corporate managers as the social mechanism for engineering success in the modern business (e.g. TQM and ‘quality circles’), culture is part of the problem.

Starting with Enron (given its primacy in defining the ethical epoch), aggressive corporate culture was cited as both a cause of its growth and success but also in embedding the view that deception and exploitation of stakeholders is ‘normal practice’. ‘Normal practice’, as it turned out in the News International media scandal, was to systematically invade the private lives of, often vulnerable, individuals without consent or compensation; a culture that proved in the end to connect the people at the top with those on the ground (dirty hands all round then!). Similarities can be observed in the banking industry with cultural changes in bankers’ propensity to accept higher risks, coupled with a culture of secrecy (e.g. libor-fixing), threatened and deceived a range of important stakeholders. When these scandals hit the front pages, the question often posed is whether ethical transgressions are a case of one perpetrator, a few ‘bad apples’ or if there is a wider-spread tendency to do wrong. Even in cases where there is a clear ethical perpetrator, as with the recent ‘bad apples’ of Jimmy Savile (child abuse) and Lance Armstrong (doping), it is suggested that some element of the cultural environment precipitates ‘moral muteness’ and/or ‘blindness’, enabling continued wrong-doing. If we are to use moral controversy as a springboard to better business-society relations, then several culture-related points need considering;

  • The need for more moral courage, not only for the heroic role of the whistle-blower (when the damage is often already done!) but to encourage speaking-up when others are complicit in their silence.
  • The ability to make moral judgments, for example, where codes of conduct are absent, too narrowly defined, too overwhelming/complex or too easily ignored.
  • The effect of hierarchy on staff’s ability to make judgements i.e. where following an established norm or rule subverts ethical reasoning.
  • The unintended impact of confidentiality associated with disciplinary action – even if they do act managers aren’t often seen to act and unethical behavior may appear to go uncorrected.

More fundamentally, given that organizational cultures are products of long-term training, recruitment, remuneration and promotion mechanisms, these key apparatus for engineering social behaviour also require some re-thinking, ideally in ways that promotes the acceptability and value of openness, courage, honesty and trust

By Dr Rob Caruana, Lecturer in Business Ethics at the International Centre for Corporate Social Responsibility.

Image by jlcwalker, reproduced under Creative Commons License CC-BY-2.0  Source: http://www.flickr.com/photos/12859033@N00/3269615681/



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